I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I started following stocks in 1981 when I was in grad school at MIT and started analyzing tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 11th book is "Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision" (http://goo.gl/ygaUV). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass.

Stanford's $2.7 Trillion Economic Jolt Beats MIT's $2 Trillion

The last time I visited Stanford University, a t-shirt was available for sale in its bookstore with a picture of a Redwood tree and the slogan “Fear The Tree.” And it looks to me like the hunger for winning reflected in this sports slogan extends to Stanford’s passion for economic preeminence.

He and his team surveyed 140,000 alumni from the 1930s to 2010 — finding that in that time, they created 39,900 companies that produced 5.4 million jobs. Annually, companies founded by alumni generate revenues of $2.7 trillion.

But what’s there to be afraid of? Maybe competitors of companies founded by Stanford alumni should worry about losing their customers. But the employees and investors who work in those companies ought to be pretty happy.

Eesley is no stranger to this kind of analysis. A few years ago, he published a similar study about the economic impact of MIT. He found that the 105,000 MIT alumni he surveyed had produced 25,800 companies, that generated 3.3 million jobs over time and $2 trillion in annual revenue.

Eesley hastened to point out that Stanford and MIT are not directly comparable, though. That’s because Stanford has resources — such as a law school, a medical school, and big humanities departments — that MIT — with its focus on engineering and science — lacks.

To do a valid comparison, Eesley reckons he would need to, say, compare the economic impact of alumni who studied in their electrical engineering and computer sciences departments.

Although the comparison is difficult, he thinks that Stanford is ahead because it has a different industry focus than MIT. Eesley notes that Stanford produces companies with more employees and greater revenues because its alumni produce more companies like Google (GOOG) focused on the consumer Internet and mobile.

By contrast, while Eesley worked at MIT, the school seemed to focus more on energy-related start-ups such as clean technology and more powerful batteries. MIT also “has a higher proportion of its startups in electronics (outside of telecommunications related electronics, which was a separate category and more even) than Stanford,” according to Eesley.

One very interesting part of Eesley’s Stanford study is that one of his researchers sorted the companies by their level of innovation — based on a variety of factors such as whether their intellectual property was patented and whether their business model was based on cutting edge science.

He found that 25% of the companies had a Medium Innovation Index (II) while 25% had a High II. But according to Eesley, the Medium II companies accounted for a disproportionate share of the jobs created (37%) whereas the High II companies generated a whopping 48% of those revenues.

If a venture capitalist could invest in a High II company, that sounded to me like it would be great. After all, companies like Instagram seem to fall into that category — generating very rapid growth with few employees — ultimately selling out at a high premium to the capital invested. But Eesley points out that a high proportion of these High II companies fail — possibly because their PhD founders struggle to find a business model for their innovations.

Having spent time at MIT and Stanford, Eesley is in a unique position to compare their cultures. He finds that both institutions put a premium on deep knowledge of academic disciplines and using technology to change the world. But he finds that Stanford students in general tend to have a broader focus — considering how technology can alter society; whereas MIT students are more likely to be content pursuing fascinating technologies for their own sake.

Eesley notes that just 3% of the companies in the Stanford sample have the biggest economic impact. And not surprisingly, these are the companies with over 10,000 employees. To win in this regional battle for economic supremacy, it’s easier to create a smaller number of big companies than a bigger collection of smaller ones.

While that’s not a mind-blowing observation, a great topic for further research is why Stanford appears to be better at turning small companies into big ones.

But regardless of whether Stanford or MIT prevails in this competition, the real winner is America and the rest of the world that benefit from what their alumni create.

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